Starting late last year, hundreds of US businesses began to receive demand letters from secretive patent-holding companies with six-letter gibberish names: AdzPro, GosNel, and JitNom. The letters state that using basic office equipment, like scanners that can send files to e-mail, infringes a series of patents owned by MPHJ Technologies. Unless the target companies make payments—which start at around $9,000 for the smallest targeted businesses but go up from there—they could face legal action.

Further reading

In a world of out-there patent claims, MPHJ is one of the most brazen yet. It's even being talked about in Congress. Rep. Peter DeFazio (D-OR), who has sponsored the anti-troll SHIELD Act, cited the operation as a perfect example of why the system needs reform. After publishing a story on the scanner-trolling scheme, Ars heard from letter recipients and their lawyers from around the country—Idaho and Texas, California and South Dakota.

Before the AdzPros and GosNels took over, the patents were owned by an entity called Project Paperless, which threatened dozens of businesses in Virginia and Georgia. Project Paperless ultimately filed two lawsuits, prosecuted by lawyers at Hill, Kertscher, and Wharton, an Atlanta firm with complex connections to the patents. In late 2012, Project Paperless sold the patents to MPHJ Technology Investments. Today, the anonymous owner of MPHJ operates GosNel, AdzPro, JitNom, and at least a dozen other shell companies now targeting small businesses around the country.

So how does it all work? Bringing in the patent payoffs is a lawyer-driven business. The top lawyer behind the new scanner-trolling enterprise is Brian Farney, a Texas IP lawyer who is senior partner at Farney Daniels. Farney won't reveal who he's working for; he simply refers to whoever is behind MPHJ as "the client." But the client did agree, surprisingly, to allow Farney to do an interview about the patent-enforcement campaign.

Another lawyer deeply involved in the scanner-trolling enterprise is Jay Mac Rust, a Waco, Texas attorney who works as a kind of in-house patent enforcer for MPHJ. He isn't the only one with that job, but Rust has a special role. It's up to him to calm down letter recipients who are "really irate"—and, at the end of the day, to get them to pay from $900 to $1,200 per worker. Rust didn't agree to talk to Ars, but a source has provided a recording of a revealing conversation he had with Rust.

Together, the Farney and Rust conversations show how the scanner-trolling campaign is designed. They also give a glimpse at how the lawyers involved see themselves. It's the most insight available into a scheme that, to some business owners, feels like a shakedown.

So what are the top lawyers behind MPHJ Technology Investments like? Well, on the phone they come off as really nice guys. Demanding payouts from small business users of everyday technology isn't the typical patent enforcement strategy, but it's perfectly legal under US law. As a business strategy, however, it has generally been considered unworkable—and unwise.

Well, until now. As the art of modern "patent trolling" enters its second decade, the MPHJ scanner-trolling scheme has opened a new front in the battle. The company has a patent that it believes is being violated by "99 percent" of American office workers. And it wants to get paid.

“99 percent of people are using it. You know it and I know it.”

Mac Rust is one of a few lawyers who gets certain "territories" of the MPHJ patent scheme. A person who had a conversation with Rust in January about alleged violations of the MPHJ patents—I'll call the source Mr. Smith—gave Ars a recording of his phone call. The recording was made with Rust's knowledge.

In the call, the confused Mr. Smith starts out by telling Rust he can scarcely believe what is happening. "Just to reiterate, my home printer—if I scan to e-mail, it's an option on my Hewlett-Packard printer—I do that, I owe you money?" asks Smith.

"If you said you hooked it up to the Internet, and in one button, you can scan and e-mail directly out—yes, you have violated the patent that we own," says Rust.

That means millions of Americans owe Rust’s anonymous client money. But Smith seemed overly focused on his personal behavior, with his home printer. Individuals aren’t the intended target, Rust explains.

“We’ve been trying to do what we can to focus on businesses that have 10 or more employees,” says Rust. “But look, it's not perfect. All our information is not exactly perfect. That’s why we send a letter to ask you certain questions.”

The six-letter entities are divided up by region, Rust continues. "According to patent law, if we're going to sue you, we have to sue you in your area. So we broke those up, so we could sue in those individual areas, so we don't have to drag you to Delaware [where MPHJ is incorporated]. You don't really want to fight in Delaware, and I don't want you to have to fight in Delaware."

"I see. So you're doing me a favor!" says Smith.

"In a sense, yes," replies Rust.

"So—I'm sorry," says Smith. "You're going to have to bear with me. I'm just flabbergasted."

"I highly recommend you contact a patent attorney," says Rust, a theme he returns to throughout the 15-minute phone call.

Telling target companies to consult an attorney may seem like a surprising suggestion for an enforcer of controversial patent claims. But suggesting that small companies lawyer up probably yields excellent results for Rust and MPHJ. A patent lawyer will likely tell targets that the letters shouldn’t be ignored, and the lawyer will quickly let them know the cost of fighting an issued patent, which can be hundreds of thousands of dollars—or millions, if a case actually goes to trial. That’s far more than the cash asked for by AdzPro, GosNel, and the other MPHJ entities, which will grant a license for between $900 and $1,200 per worker—around $100,000 for a 100-employee business.

"I promise, they'll help you to understand how patent law works,” says Rust. “You'll figure out it's not a scam. It's not some kind of bull. We're not trying to harass people. They'll look up the patents and tell you whether or not what you do infringes. And if you don't infringe, hey, let us know that."

In the MPHJ declaration, which Ars has obtained a copy of, a representative of the target company must swear under penalty of perjury that the company doesn't use any equipment that scans a document to e-mail and then transmits it over a network. If that statement proves to be false, the company agrees to a "consent judgment" in the amount of $1,200 per employee.

"99 percent of people are using it," says Rust. "You know it and I know it. So, yeah."

Smith continues to be incredulous that he as an individual, and not a big company, could be on the hook for payments related to patents. At one point, Rust uses an analogy about Apple v. Samsung to explain to Smith the power that MPHJ has over him.

"Do you know that if you had bought a notebook—or whatever, the Samsung version of the iPad—you know they could have come and taken those away from you? Actually made you give them all back? Do you know that?" says Rust. "So I mean—it's interesting how patent law works. They could have actually stopped everybody from using them. Even though you paid your thousand bucks for the thing, they could have taken them away, under patent law."

Near the end of the call, Smith asks Rust how he even got his phone number. (The call was initiated when Rust called Smith; Smith had been repeatedly calling the call center number featured on the threat letters.)

Rust explains that in general, the scheme is broken up geographically, with certain MPHJ lawyers getting certain regions. The lawyers stick with the target company they are assigned to, suggesting they are paid on some kind of commission basis. But there’s a certain type of business owner that always ends up with Rust and his easygoing Texas drawl: the angry ones.

"You're the lucky guy that gets me," Rust explains to Smith. "I get to answer all the ones that are really, really… irate. And I understand that."

"I'm not irate at you, Mac, because like I said, you seem nice," says Smith. "But I am irate."

"I know you are, and I don't blame you," says Rust. He continues:

That's why I encourage people to go to a lawyer. Look, I'm a regular lawyer, too. I started out doing litigation. So if I had seen it [the threat letter], I would have gone, "Aw, bullshit," just like everybody else. But unfortunately once you get into the patent world, you'll find out… some guy that made an invention in 1999, back when this was a novel idea, really does have rights. Even going for a long time into the future. Now that… scanning and e-mailing has replaced the fax machine, all of a sudden his invention is really, really valuable.

Rust ignored our phone calls and e-mails requesting interviews over a period of several weeks. Last week, I made a final phone call to let him know we were moving to publication with a piece that included a recorded phone conversation of him as well as a photo.

He returned that call within minutes.

"I'd appreciate you not running a photo of me, anywhere," said Rust. "You know how photographs work, with copyright and all. If there's a photograph up online of me, I own it."

I simply told Rust that we did have a photo that was fine for us to use, with or without his permission. I asked if he would talk about his work on the MPHJ patent campaign at all.

"No," he said. "I think you've already talked to Brian Farney. I doubt seriously if anything I say is going to change your mind about the legality of this, or anything else."

Haven't they heard that assclowns like themselves are being taken to court and sued by those who don't like the idea of protection rackets like theirs? Is it any wonder they don't want to reveal their names when they know they're committing crimes? You call me with this crap, and I'm going to tell you to talk to HP, and if you refuse, I'll have you arrested for harassment and racketeering.

If they try to go make a business out of the idea, they’re going to ask that.

I think Farney himself, in his attempt to connect with Ars' readers, really hits the nail on the head. Notice that he doesn't talk about patenting a device or even a distinct piece of software, but a business. I think a lot of us would argue that the patent regime has been so stretched as to be not only nonsensical but dysfunctional. Where mechanical processes end and institutional processes begin is, I know, somewhat of a blurry issue in the current "knowledge economy," but I gotta say the sooner we do away with the idea of being able to patent business ideas, the better.

That noted, attorneys like these guys ... well, nothing needs to be said.

Just so the rest of the readers of this article know, my client holds a patent on being able to receive news and commentary over the Internet using a standard web browser. As you can imagine, the development of such sophisticated technology was very expensive and when it was illegally used by thousands of other parties to transform the Internet my client suffered immense damage. However, you can license this technology and make your use of it once again legal for a very reasonable subscription fee. Near the top of the web page on which you are reading this message, there is a link that will lead you through the process. When you are done, you and all other users of my client's property will be able to see that you are an official legal licensee, thus protecting you from future litigation. Your status as "et subscriptor" is important to us so please check with your patent lawyer so you fully understand the gravity of this issue.

I hope Rust's understanding of patent law is better than his understanding of copyright law. They are targeting the smaller businesses, those more likely to be intimated (a modern era protection racket scheme) by the thought of a lengthy and expensive legal action. If this were considered a criminal matter, under the RICO statutes for instance, I wonder if the US government itself could be considered part of the criminal enterprise.

Stop using the Scan to Email feature. Instead have a written policy that requires all employees to select the scan to temp document & attach to email process (completely automated of course )

Once that is done, type out the letter informing the trolls that your use of the scanner is not infringing and have a company officer sign it. Send it to the troll's designated lawuer and let them decide if they will fail to follow their own declared procedures

Once that is done, type out the letter informing the trolls that your use of the scanner is not infringing and have a company officer sign it. Send it to the troll's designated lawuer and let them decide if they will fail to follow their own declared procedures

I think if you check with most legal counsels, they'd indicate that is probably a very bad idea. If you're contacted by one of these type of outfits, I believe your best option is to do nothing unless you're the type that would prefer to rollover and send them money. That will force them to continue to be the one taking the first step and you won't have provided any new documentation that can ultimately be used against you later.

I think you mistake "psychopath" for "nice-guy." And I don't mean that flippantly, I mean it in the DSM definition of the word.

Furthermore, I find their explanation for how this practice will promote innovation to be wanting. It seems to me that one of two things will occur due to their mistaken belief that their scheme is a good one:

A: Because no party who is the target of this extortion is in the position to innovate, none of them will innovate; or

B: Creators will take note of this practice, put together some sham-like patent, and extort indefinitely, thus perpetuating our crummy system.

This is just another lawyer scam. Scumbuckets who 'technically' are lawyers do it in order to shake people down for money. That should be obvious, despite these LOSERS hiring this guy to put a better face on it, it's still immoral, it's still provably illegal. It's just nobody wants to start fighting back. Time for lots of well-informed lawyers to sue the heck out of these losers, and keep at it for ten years or so, until the scum moves somewhere else to steal money from people. How can these people live with themselves? Do they have ANY concience left?

For the defeat/invalidation of patents like this (which I've not read, going only by article) you need to look for prior art as it existed in industry, rather than prior patents.

In particular, HP had a "scan head" device that sent email - and it was a *looooong* time ago.

There are probably other examples - remember, you often don't find these by searching the patent literature, you find them in ads from tradeshows, manuals, etc.

And the patent system has has a problem with "no knowlege of real prior art" for some time. As in patents (I saw them) granted in the 1980s (!!!!) which were dominated by effectively identical prior art from the 1960s!!!!

Remember that software patents are relatively new, and so lots of prior art doesn't appear in the patent record because it was impossible to patent.

Farney, it's one thing to patent an actual invention and another to patent an "all-in-one button" and call it an invention. I mean, following that line of thinking, I could just as well patent a TV remote button that raises the volume, brightness and contrast, call it an invention, patent it and sue everyone. Or patent a mouse button that works as if the person pressed right+left at the same time.

I have scanners with the email function and have never used it, mainly because I don't want to go through the hassle of setting up the scanner, and also because it's not convenient, and I want a record of the sent email on my computer. So every time, not just most, but every time, I have scanned the document to a file, and then sent that. It doesn't infringe their alleged patent. I would bet that lots of people also don't use that function, certainly not "most" like the parasites claim.

In any case, I think a company being sued should insist that the plaintiffs prove that emails were sent directly from the scanner. I guess they could subpoena the devices and examine them, because it's likely that the users don't remember. However, probably to be safe that the trolls don't mess with the devices, the users should do a factory reset on any scanners they have when they receive a letter, to make sure they don't expose any confidential information to an organization that obviously has no scruples.

I'm sure these guys are congratulating themselves over the superiority of their business model relative to Prenda. After all, all they have to do is download the public records of all corporations in each state, throw in the LLC's, and start sending threatening letters to the person of record for each. Virtually no cost, no discovery, no John Does.

But as with Prenda, their business model breaks down if somebody actually is willing to fight, because then they have to spend real money and resources too.

I'll worry about it when they pay a process server to show up on my doorstep. I'm not holding my breath.

Any particular reason for the tangent in the middle of the story about Rust and the ponzi scheme? It seemed completely unnecessary and really disrupted the flow.

But yeah... the stance that the patent covers not the device (i.e. every networked copier sold for the last 10 years) but using the device for its expressly designed purpose (copy to email) is pretty insane.

I wonder if part of this whole patent system gone awry is the excess lawyers in the country? There's been such a big jump in law graduates in the last few years that a lot can't find jobs. Is this the end result of that?

Honestly this troll is a good thing. As soon as smaller corporations start getting heat they'll be complaining left and right. It's better to have thousands of traditional companies hit by this as politicians (for better or worse) are likely to be more responsive to them and actually look at the problem.

I'm gonna go out on a limb here and say that the new AIA has new Post Grant Trials which cost around 35,000 and which would allow a bunch of folks who get sued by these scumbags to join together and invalidate this crappy patent.

You know, in this economy its not exactly easy for small business to make it. Quite sad really.

Another issue is that it should be simply downright not possible for someone to sue someone else just because they purchased a product and then used it as intended and sold. Shameful, and it should be stopped immediately.

And HP and Canon and whoever else have no legs to stand on when it comes to their "we have no dog in this fight" mentality. They sold a product to an end user and that end user is just using it. Stand up, do SOMETHING!

TheGerbil wrote:

Ars,

Could you get a list of companies that paid them, so we can pillory and boycott them? That'd kind of force them to say "Just sue us but we will sue back big time" and stop feeding the trolls...

Screw that, I'LL SUPPORT AND BUY FROM THE COMPANIES THAT PAID THEM OFF. Seriously.

They were HARASSED, likely SCARED of getting sued into oblivion and took the fastest, cheapest, easiest way out. These are small business who operate on small scales and absolutely do not have limitless supplies of money. How can you possibly blame them for not wanting to fight? Give me a break.

Honestly this troll is a good thing. As soon as smaller corporations start getting heat they'll be complaining left and right. It's better to have thousands of traditional companies hit by this as politicians (for better or worse) are likely to be more responsive to them and actually look at the problem.

Indeed. Finally a patent that members of Congress can understand. They don't understand the Internet. They may not understand email. And they obviously don't understand the web. But they probably understand "a new fangled way to send a fax."

The intent of patent protection is to grant the inventor an exclusive right to benefit financially from his creation. This being said, the inventor is the only one who should be able to make money from his idea - a fact that Mr Rush seemed to miss in law school; He has manipulated a Constitutional protection in order to strong arm businesses into giving him and his law firm a payoff. It seems he has forgot that his duty is to protect his client's interests, not to prey on innocent businesses.

When a manufacturer sells goods to a buyer, the manufacturer grants the buyer an implied license to use the good and all of its contained technology - this includes all computers and electronic goods - even if these goods contain specific patented software or patented business systems to operate. We've all seen this - each and every time we buy a computer with software that was installed prior to purchase by the manufacturer.

And as most of us know, if there is some technology that must be purchased after setup of the good in order for the good to run properly, then the purchaser is guided step by step to acquire the required technology with the responsibility of ensuring the perfected license on the manufacturer - NOT THE CONSUMER!!! The consumer is always protected and would never be held liable for a manufacturer that did not take all steps required to avoid trademark, copyright or patent infringement by a consumer who uses the good as sold by the manufacturer.

The manufacturers of scanners who have the ability to scan to email as an integral part of their software capabilities have acquired a license or have outright purchased the patent from the inventor of the software / business technology or they would be infringing on the patent of the inventor. The consumer is not the infringer if this technology is readily available on these scanners;

Declaring the consumer as the infringer in these cases is a improper attempt at monetary gain by an attorney... He and the attorneys at his law firm should be reported to the TX Bar for their obvious attempt to shake down innocent businesses with a costly patent case who use the technology that they have legally purchased;

"The second thing they’ll think is: how do they protect that idea and stop someone from copying it? If they try to go make a business out of the idea, they’re going to ask that."

Um, no, that's the last thing that I'm going to think.

I may be a Free Software communist, but I don't believe in any law that punishes decent human behavior. If I have a good idea, then I want to share it, and make the world a better place. Maybe I'm the best at implementing the idea, and then I'll be rich. But, more than likely, someone else makes it better, and we all benefit. (Well, we would, if we didn't have such dysfunctional patent and copyright. Thank Stallman for the GPL.) Instead, we have a system that actively discourages engineers from searching the patent record, because patents are of very low quality and willful infringement carries treble damages.

Gee... maybe they'll sue me. I'd love to pop a breach of implied warranty suit on H-P. "You told me I could use this button to scan to email, and now I'm sued!" I think H-P and I could become friends very quickly. So quickly, in fact, that I'd never even have to actually file an actual suit. As long as H-P's lawyers defend me.